TaxTMI 
TaxTMI 
2026 (9) TMI 924
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....pleted in the manner provided under section 144 of the Act. 2. The assessee has raised the following grounds of appeal: 1. a. The order passed by ld. CIT(A) sustaining order passed by ld. AO is bad in law, bad in facts and perverse, contrary to material available on record without assigned any reason and the assessment order made only on basis of surmises. b. The addition so sustained is bad in law and bad on facts. The order so sustained is contrary to principle of natural justice and without granting of opportunity of being heard. 2. a. The ld. CIT(A) has erred in sustaining an addition of Rs. 42,00,000 for alleged unexplained deposit in the bank account of the appellant. The ld. CIT(A) had erred in not properly appreciating the facts and circumstances. 3. b. The ld. CIT(A) has erred in rejecting the books of accounts u/s 145(3).The rejecting of the books of accounts is bad in law and bad on facts. 4. The appellant craves liberty to add, alter, amend or vary from the above the above grounds of appeal at or before the time of hearing. Facts of the case: 3. The assessee is an individual engaged in the wholesale trading of pulses....
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....70,000/- on 05.11.2016, the cash book reflected opening and closing cash balances exceeding Rs. 37,00,000/-. 7. On these considerations, the Assessing Officer invoked section 145(3), rejected the books and proceeded in the manner provided under section 144. The assessment order proceeds on the basis that the assessee claimed cash in hand of Rs. 45,00,000/- as on 08.11.2016. The Assessing Officer accepted Rs. 3,00,000/- as explained cash having regard to the nature of the assessee's business and treated the balance amount of Rs. 42,00,000/- as unexplained money under section 69A. The returned income of Rs. 9,62,750/- was accordingly assessed at Rs. 51,62,750/-. Tax was directed to be computed under section 115BBE, and penalty proceedings under section 271AAC were initiated. 8. The assessee filed an appeal before the CIT(A). Before the CIT(A), the assessee contended that cash sales and cash collections from debtors constituted a regular feature of the wholesale trade in pulses. It was submitted that goods were sold through brokers and commission agents, who procured orders and also collected the sale consideration. The disputed receipts were recorded in the audited books and th....
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.... 31.03.2015 Rs. 33,40,632.61 31.03.2016 Rs. 26,25,479.42 01.04.2016 Rs. 28,07,407.42 01.10.2016 Rs. 31,42,960.84 01.11.2016 Rs. 34,47,303.08 07.11.2016 Rs. 42,31,454.78 08.11.2016 Rs. 48,29,204.23 01.12.2016 Rs. 16,80,528.16 30.12.2016 Rs. 17,10,517.48 31.03.2017 Rs. 8,37,861.33 12. It was further submitted that Rs. 7,82,000/- had been looted from the assessee on 07.04.2016, out of which Rs. 5,25,000/- was recovered and kept in court custody. The amount was released on 15.12.2016 and deposited in the IndusInd Bank account on 19.12.2016. 13. The learned AR submitted that the assessee maintained computerised books. Since the data was voluminous and could not be uploaded on the portal, the assessee expressly offered the cash book, ledgers, sales and purchase registers, bank statements, sales and purchase vouchers and other records for physical verification. The Assessing Officer passed the order on 17.12.2019 without examining the material so offered. 14. The learned AR further submitted that, though the Assessing Officer used the expression "rejection of books", he accepted the returned business income and did not est....
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....llant about the cash transaction reply was vague, self-serving, and contradicted by appellant's own books. The books of appellant showed abnormal increase in cash-in-hand, no stock register, no debtor confirmations, no complete & reliable cash book, no evidence of specific cash sales, no pattern of such high cash deposits in earlier years. Thus, the explanation was internally inconsistent, making the AO's addition fully justified." 21. We have considered the rival submissions and perused the material available on record. The substantive controversy is whether the recorded cash balance deposited into the bank during the demonetisation period could be treated as unexplained money under section 69A. 22. The Assessing Officer has formally invoked section 145(3). However, after purportedly rejecting the books, he has not estimated the business income of the assessee. The turnover of Rs. 20,49,34,509/-, gross profit of Rs. 38,13,930/- and returned business income have not been disturbed. No suppressed sale, inflated purchase or discrepancy in the overall trading account has been identified. 23. The primary basis for rejection of the books was that the assessee had not furnished ....
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....sponding entries were false. 29. The arbitrary nature of the estimate is further evident from the acceptance of Rs. 3,00,000/- as explained cash without any discernible basis. The assessee's books reflected cash of Rs. 48,29,204.23 as on 08.11.2016, out of which Rs. 45,00,000/- was stated to have been deposited. The Assessing Officer neither reconciled this balance nor demonstrated how only Rs. 3,00,000/- represented genuine cash. 30. Rejection of books under section 145(3) must be based on specific defects which render the accounts incapable of correctly determining the business income. In the present case, the disclosed turnover and trading results were accepted, and no independent estimation of business profits was undertaken. Considering the material furnished and offered for verification, we find that rejection of the books was not justified merely on the basis of suspicion surrounding certain cash receipts. Ground No. 2(b) is accordingly allowed. 31. Section 69A applies where the assessee is found to be the owner of money, bullion, jewelry or another valuable article which is not recorded in the books of account, if any, maintained by the assessee, and the assessee e....
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....come unless the Revenue establishes that the receipt arose from a source outside the recorded business. 38. The Assessing Officer has not brought any material on record establishing that the deposited cash arose from an undisclosed source. No inquiry was made from the identified parties. No corresponding sale was found fictitious. No material was found outside the books. The addition was made because the Assessing Officer considered the accumulation and retention of cash commercially improbable. Such improbability, without corroborative evidence, cannot satisfy the statutory conditions of section 69A. 39. The assessee furnished the progressive cash balances from 31.03.2015 onwards. The cash balance was stated to be Rs. 34,47,303.08 on 01.11.2016 Rs. 42,31,454.78 on 07.11.2016 and Rs. 48,29,204.23 on 08.11.2016. The cash deposit of Rs. 45,00,000/- was therefore within the cash balance appearing in the books. 40. The Assessing Officer did not find that the amount deposited exceeded the cash balance appearing in the cash book. He also did not establish that the bank deposit was not reflected in the books. The cash-book entries might have called for inquiry, but in the absence....